Does your IRA play by the rules?

For years, taxpayers who made mistakes with their IRAs usually corrected the errors and notified the IRS - and escaped unscathed. The agency was not as strict with enforcing penalties, and taxpayers often didn't even hear from regulators.

But as the government looks for new sources of revenue, those days of IRS leniency may be ending. The agency was slated to report to the Treasury Department in October about how it will pursue taxpayers who have made mistakes with their IRAs. It's not clear when the new scrutiny will begin, but Hope Brown, IRA Product Manager at Wells Fargo Advisors, LLC, says taxpayers should start preparing now.

"The rules are already there," Brown says. "It's just a matter of cracking down and enforcing them. We really expect it to be sooner rather than later."

What are the most common mistakes taxpayers make with their retirement accounts? Brown's picks are outlined below, along with advice on what to do if you find errors - and how to help prevent them in the future.

? Making excess contributions. For 2012, the IRS allows you to contribute up to $5,000 to your traditional or Roth IRA - $6,000 if you're 50 or older (for 2013 the contribution limits increase to $5,500 and $6,500 respectively). But sometimes people unintentionally contribute more, Brown says. Or those with Roth IRAs may continue to contribute the maximum to their accounts after their income has exceeded the eligibility requirements ($110,000 for single filers, $173,000 for joint filers in 2012). In 2013, the maximum eligible income amount is up to $112,000 for single filers and up to $178,000 for joint filers. "You can fix that by recharacterizing the contribution into a traditional IRA," Brown says.

Contributing more than the eligibility limit can cost you: The IRS levies a 6% tax on the excess contributions made each year. "Often these mistakes aren't identified for years, and it can really add up to a large penalty," Brown says.

? Forgetting to take distributions. If you have a traditional, SEP or SIMPLE IRA, your required minimum distributions must be taken by April 1 of the year after you turn 70½. (Roth IRAs don't require minimum distributions for the IRA owner.) Brown says many people assume the date is April 15 because that's when tax returns are due. After the initial distribution, the deadline is December 31 going forward. For individuals delaying their first distribution, that means there may be two distributions required in the same tax year. Brown recommends setting up automatic distributions - which you can do through Wells Fargo Advisors - to make sure those withdrawals happen. The penalty for missing a distribution is stiff: The IRS can fine you 50% of the amount that should have been withdrawn.

? Improperly withdrawing from an inherited account. Unlike spouses, nonspouse beneficiaries can't roll inherited IRA assets into their own IRA. Instead, they need to set up an inherited IRA and continue taking the required distributions from that account. "Once you cash it out, you lose the tax-advantaged status of the assets," Brown says.

If you have made a mistake with your IRA, Brown recommends correcting it immediately, and then notifying the IRS. "Don't sit on it," she says. Regulators often forgo penalties if the taxpayer fixes the problem - but will that forgiveness continue?

And with the potential for increased IRA scrutiny, the best defense may be a good offense. Brown says you can help avoid IRA errors by:

? Knowing the IRA rules, and working with financial professionals who do

? Reviewing your retirement plan at major life changes - for instance, after a marriage, birth or death - and at ages 59½ (the age you can start withdrawing from tax-advantaged retirement plans) and 70½ (when distributions from the account must start)

? Consolidating several retirement accounts into one to make managing them easier - consider previous employer retirement plans along with IRAs held at different financial institutions

? Keeping detailed records of your accounts for when questions do arise.

It's important that you take some time to make sure your retirement accounts are in order. A review with your financial adviser will help you avoid common mistakes and shield your hard-earned retirement savings from potential penalties, thus helping to ensure that the assets are available when you need them.

This article was written by Wells Fargo Advisors and provided courtesy of Dustin Schofield / Vice President of The Schofield Group Investment Management in St. George, 674-3601, www.theschofieldgroup.com.

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Does your IRA play by the rules?

For years, taxpayers who made mistakes with their IRAs usually corrected the errors and notified the IRS ? and escaped unscathed. The agency was not as strict with enforcing penalties, and taxpayers